Do LLCs Have to Record Annual Meeting Minutes?
Does your client run an LLC that's taxed as a corporation? If so, remind them the IRS requires them to draft minutes of their meetings. Otherwise, they could land in hot water.
If a business operates as an LLC, it has tax flexibility. If it meets the IRS eligibility requirements, it may opt to be taxed as a C Corporation or S Corporation. So, what does that mean for holding annual meetings and recording annual meeting minutes? Most states require corporations to hold annual meetings and draft minutes. Does that mean an LLC that chose to be taxed as a corporation now needs to hold shareholder meetings? Naturally, this can be a bit confusing for business owners!
What Are Annual Meeting Minutes?
Meeting minutes serve as an official account of what attendees discussed, decisions made, and actions taken at formal meetings, such as a business entities' annual meetings. Annual meetings and minutes requirements vary by state and entity type.
Does Tax Election as a C Corp or S Corp Affect Whether Minutes Are Required?
The responsibility to record annual meeting minutes is dictated by the underlying entity type’s obligations, regardless of its tax election. Even if an LLC opts to be taxed as a corporation or S Corporation, its other business compliance responsibilities remain that of its registered business entity, i.e., a limited liability company. This includes any meeting and minutes requirements.
Generally, states don't require LLCs to hold annual member meetings and write minutes. However, there may be language within an LLC's operating agreement that requires them. LLC members need to conduct meetings and draft and approve minutes of those meetings when that's the case. Doing so demonstrates that business owners are treating the limited liability company as a separate legal entity. That is essential for keeping the LLC in good standing with the state and maintaining the "corporate veil" that gives its owners protection against the business's liabilities.
Annual Meeting Minutes Tips for LLCs
1. Look for Time-Saving Templates
Businesses can find templates that provide a basic format for meeting minutes online. That can ensure that minutes follow a consistent structure from one year to the next. A template also saves LLC members the time and hassle of developing their own format from scratch.
LLC annual meeting minutes typically include:
- Date and time of the meeting
- Where the meeting was held
- Who created the minutes (a.k.a., the LLC secretary—in a single-member LLC, this would be the sole owner)
- List of persons attending the meeting
- Meeting agenda with a brief description of each item
- Details about what members discussed
- Decisions made or voting actions taken
- Time of the meeting’s adjournment
- LLC’s secretary’s signature and date
2. Obtain Member Approval of the Minutes
After minutes are drafted, they should be distributed to the LLC members for review. Upon members’ feedback, the secretary should make any necessary corrections and re-distribute to the members. Upon approval by the members, the minutes become a part of the LLC’s corporate records.
3. Keep the Minutes with Other Important Entity Documents
After annual meeting minutes have been approved, a business should keep the original executed copy in a safe place with its other corporate records (e.g., Articles of Organization and LLC Operating Agreement). Generally, an LLC should keep its minutes for at least seven years. If there are any specific instructions in the LLC Operating agreement for handling minutes, the LLC members should follow them.
4. Make It Manageable
What if an LLC's operating agreement has an annual meeting requirement and the members later decide that they're unnecessary or too cumbersome? It can potentially create legal issues if an LLC is bound to holding annual meetings and preparing minutes but consistently can't find the time or doesn't make an effort to fulfill those requirements. Under those circumstances, the LLC members might consider amending their operating agreement to remove the provision.
One More Second on the Topic of LLC Meeting Minutes
Even though states do not legally require LLCs to submit meeting minutes, holding annual meetings and keeping a record of what was discussed demonstrate that an entity is abiding by its business compliance formalities. As I mentioned earlier, doing so is critical for maintaining the all-powerful corporate veil that protects business owners' personal assets. If you have clients considering forming an LLC or who operate as an LLC but are unsure of their obligations, they may benefit from talking with an attorney to get some direction.